7 Warning Signs Your 401k Retirement Assets May be Exposed to Fraud


If you are like most people, you rarely give much thought to your 401k. You know it is there, and you know you contribute to it with every paycheck, but you do not watch it closely, and you certainly do not monitor it for signs of fraud.

Unfortunately, financial fraud targeting 401k retirement plans is a very real concern—so much so that the Internal Revenue Service (IRS) houses an Employee Plans Compliance Unit that is specifically tasked with addressing fraud targeting 401k plans and other similar types of accounts. The Securities and Exchange Commission (SEC) has issued Investor Alerts warning of fraud risks for retirement investors, and we regularly hear from individuals who have discovered fraudulent transactions in their retirement plans.

Has Your Employer Failed to Protect Your 401k Assets?

Employers can – and should – adopt internal controls designed to protect their employees’ retirement savings. From accessing employees’ account information to redirecting payments and forging checks, there are numerous ways that unscrupulous individuals can siphon money from retirement investors’ 401k accounts when employers fail to adopt adequate controls. If you are aware of any of the following shortcomings in your employer’s policies and procedures, there is a possibility that your 401k assets could be exposed to fraud:

1. Lack of Internal Review

At smaller companies (and some larger companies), 401k plans may be managed by a single employee. When this is the case, all transactions should be reviewed by a supervisor or manager.

2. Lack of Third-Party Review

Employers should have independent third-party auditors or accountants review their 401k plans regularly.

3. Lack of Physical or Logical Security

Blank checks should be kept in a location with restricted access, and online access to plan information should be subject to strict privacy and identity verification requirements.

4. Lack of Reconciliation

Inadequate recordkeeping can make it difficult to timely identify fraudulent transactions, and failing to maintain up-to-date books and records can expose employees’ retirement assets to fraud.

5. Lack of Verification

How easy is it to gain access to information about your account? If you do not have to provide personally-identifying information to see the details of your 401k, other people will not have to either.

6. Risky Investing and Poor Plan Management

Major swings in the value of your 401k and investments that involve unreasonable risks for a long-term retirement plan can also be signs of fraud.

7. ERISA Violations

Finally, under the Employee Retirement Income Security Act (ERISA), employers owe various duties to their employee-investors. In many cases, ERISA violations will be indicative of fraud and will give 401k owners grounds to seek to recover their investment losses.

Discuss Your 401k With a Financial Fraud Lawyer at Zamansky, LLC

If you are concerned about transactions or other activity affecting your 401k, it is important that you speak with an attorney promptly. At Zamansky, LLC, we provide experienced legal representation for retirement investors nationwide. To discuss your concerns in confidence, call us at (646) 663-5628 or request an appointment online today.